Objectives of Studying the Organization

Purpose of studying this organization is that, I have my own interest in this bank, because of my friend and good repute of this bank. My friend is doing job in this bank and I think this bank provide better jobs opportunity as compare to other organizations, thats why I choose this organization for internship. Another reason for studying this organization is that, the bank manager was my father friend, therefore my father recommend this bank for internship program and here I gained practical experience related with my course and I come to know how bank use the policies and strategies and how evaluate its performance. I feel pleasure and honor that I got the opportunity to work in such a privileged and reputable bank of the country. During my internship program I tried my every best to equip myself with all important knowledge. In this report, I have tried to humble endeavor to cover various aspects of bank like, introduction, its history, main departments, culture, objectives and working financial analysis.

BRIEF HISTORY OF HABIB BANK LTD : The Habib Bank Group is a leader in Pakistan's services industry. An extensive network of 1425 domestic branches the largest in Pakistan and 55 international branches has enabled HBL to provide comprehensive services that meet customer needs. This has ensured thriving client relationships that form the backbone of the Bank's operation. Today, HBL plays a central role in Pakistan's financial and economic development. It has come a long way from its modest beginnings in Mumby on August 25,1941 when it commenced operations with a fixed capital of 25,000 rupees. Impressed by its initial performance, Quaid-e-Azam Mohammed Ali Jinnah asked the Bank to move its operations to Karachi after the creation of Pakistan. HBL established itself in the Quaid's city on August 7,1948 and became a symbol of pride and progress for the people of Pakistan. Habib Bank has been a pioneer in providing innovative banking services. These have included the installation of the first mainframe computer in Pakistan followed by the first ATM and more recently, internet banking facilities in all our 1425 domestic branches. The Bank's towering presence in Pakistan's financial and commercial life has remained unchanged over the decades. The strength of its brand and image is symbolized by its prominent Head Office building that has dominated Karachi's skyline for35Years. We continue to build on our track record and in our quest for excellence we strive to meet the needs of both our customers and our employees. At Habib Bank we aim to ensure customer satisfaction by providing high quality banking services. This is made possible by the professionalism of our employees all of whom are provided with the requisite training and opportunities to enable them to realize their full potential.
2

NATURE OF THE ORGANIZATION. The word bank has been derived from the French word banque or bancus which means bench, office or institution for the keeping, lending and exchanging of money. Some authorities have the opinion that Bank is derived from the Germen word back which to the meaning of joint stock fund. The bank is a financial institution that borrows money from one party and lends to the other party (Government, individual, business) and the difference between borrowing and lending make profit for the bank. Bank borrows and lends money on interest basis. Banks are classified according to their sphere of activity; the main types of banks are as under. Commercial banks Industrial banks. Agricultural banks. Saving banks. Exchange banks. Central banks. Cooperative banks COMMERCIAL BANK: Commercial is engaged in performing the routine duties of banking business. Such bank collects the money from the people (as borrowing) and extends the same money as a loan for development purposes. Commercial bank plays a vital role in the economic development of a country by performing the variety of function as given below: Accepting of deposits (Current, saving and fixed account).
3

 Making loans and advances (overdraft, cash credit, discounting bill). Agency services to customers (Collection of cheques, dividends, electricity, water and gas bills, and sale of securities, and acts as a trustee. General utility services (Foreign business, Issue traveler cheques, providing trade information). HISTORICAL DEVELOPMENT OF BANK: History of bank is very old, the history of bank is traced to as early as 2000 B.C. The priest in Greece used to keep money and valuable of the people in temples. Its origin is also traced to early goldsmiths. They used to keep strong safe, for storing the money and other valuable of the people. People with surplus money deposited with them. The first stage in the development of banking was the acceptance of deposits from people. Later on goldsmiths began to issue receipts for the money deposited with them to settle transactions. These receipts were used in payment of debt and acceptable to all. This was the second stage towards the development of banking. When goldsmiths realized that they had surplus money therefore they intended to lend some portion of money to he nearly traders and merchants who constantly requested for loans This business was quiet profitable and they instead of charging interest from depositors began to give interest on the money deposited with them to attract more people this was the third stage towards the development of banking. They also planned to allow the customers to withdraw in excess of the amount deposited to meet the customers needs. This facility is called overdraft and they used to keep some portion of money for this purpose.

After some time there was then started too much confusion in the banking system and they were not able to meet the demands of customers. This failure on the part of money lender to return money caused distress among the people. To overcome this problem people felt that their must be a bank which control the banking activities of different lending organization. As a result of conference held in 1548 at Nuremberg. The decision was taken in favour of establishing a bank that regulates the banking activities. The first bank was found in Geneva in 1587. Later on many other banks were established will the same objective. We can conclude that commercial banking system actually developed in nineteenth century. Now a days the banking activities has greatly increased commercial banks are now multi serviced organizations and play an important role in financial markets and in the economic development of the country.

Business Volume of the Bank

Profit Bank has contained successfully to maintain consistent and sustained growth during the year 2011. The Bank posted 45% increase in operating profit (i.e. profit before provisions and taxation) against last year. However after tax profit grew by 54.8% against the last period. NPLs increased by 20% against last year. Analysis of Profits: Profit 2007 Rs. In 5763 Million 2008 9647 2009 12700 2010 10084 2011 15614

18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2007 2008 2009 2010 2011 profit

Advances Advances are stated net of provisions for non-performing advances. The provisions against non-performing advances are charged to the profit and loss account. Advances are written off when there is no realistic prospect of recovery. During the year the NPLs increased by 20% to Rs. 9388 million as against Rs. 7823 million last year. This increase is a result of further down grade of few large exposures besides some new classifications. Analysis of Advances. Advances 2007 Rs. In 259089 Million
Advances.

2008 316882

2009 349433

2010 2011 382173 456356

500000 450000 400000 350000 300000 250000 200000 150000 100000 50000 0 2007 2008 2009 2010 2011

advances

Deposits Deposits increased by 12.3% to Rs. 597091 million as at December 31, 2011 as against Rs. 531298 million last year. Analysis of deposits show that current and saving deposits increased by 17.6% and 1.60% respectively and growth of 30.4% recorded in fixed deposits. Deposits are generally regarded as the life blood of the banking industry. In order to improve the deposits base of the bank a Sustainable Long Term Deposits Mobilization Strategy has been devised. For this purpose a team of young and energetic Business Development Officers established last year is functioning very effectively. Analysis of Deposits. Deposit s Rs. In Million
700000 600000 500000 400000 300000 200000 100000 0 2007 2008 2009 2010 2011 deposits

2007 404629

2008 432545

2009 459140

2010

2011

531298 597091

Number of Employees.

Number of Employees

Year 2007 2008 2009 2010 2011

18625 16314 14572 14552 14123

Corporate Information.

Sultan Ali Allana Mr. R. Zakir Mahmood LainDonald Sajid Zahid Ahmed Jawad Mushtaq Malik Mr.Yasin Malik Mr. Ayaz Ahmed Ms Nausheen Ahmed Audit Committee Mr. Lain Donald Cheyne Mr. Sajid Zahid Mr. Ahmed Jawad KPMG Taseer Hadi & Co Chartered Accountants Legal Advisors

Chairman President & Chief Executive Director Director Director Director Director CFO Company secretery Chairman Member Member Auditors
Mahmood Yousuf mandiwalla

Product lines offered by the bank.

Habib bank offers a full range of banking products and services to its customers across the country. The elegantly designed product centers at its branches offer to the customers the ease and convenience of conducting banking transactions in full confidentiality and privacy in a first class way, the personalized and professional services of dedicated relationship managers, committed to meeting all financial needs of the customers not only help the customers in their investment plans but also save them from the hassle of waiting in queues. Corporate Banking Products. Corporate banking products includes loans, structured finance, working capital financing, corporate advisory services etc. Islamic Banking Products. Banking offers Shariah compliant products and services to meet the short and long term requirements of Islamic Banking is a growing market segment that offers attractive opportunities to potential and existing customers. At HBL, Islamic business, trade and industry. Islamic products are Ijarah, musharaka, murabaha. Consumer Banking Products. Consumer banking products includes credit cards i.e, Gold card, green card. Visa Debit card. Other products are mutual funds, phone banking facility. And insurance products like amaan and tabeer. Bank Also gives mortgage finance, personal finance etc. Advances & Credit quality Products. Advances and credit quality products includes term loans, running finance, short term facilities for local trading, cheque purchase facilitry, letter of credit, gurantees, foreign currency financing etc.

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Organization Structure
Main offices ( Head Office and branches) Head Office Habib Bank Plaza I.I chundrigar Road, Karachi Pakistan. Branch Network Name of Region Bahawalpur Faisalabad Gujranwala Gujrat Hyderabad Islamabad Jhelum Khi North Khi South Lahore Mardan Mirpur Multan Muzaffarabad Peshawar Quetta Sahiwal Sargodha 53 95 64 65 54 112 76 77 66 92 92 51 97 34 100 36 77 78 Branches Branches Branches Branches Branches Branches Branches Branches Branches Branches Branches Branches Branches Branches Branches Branches Branches Branches
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Sialkot Sukkur Sub Total Business Centers Commercial Banking Corporate Banking Islamic Total Banking 17 13 1

69 49 1437

Branches Branches

Branches Branches Branch

1468 Branches

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Departments of the Bank

Banking procedures are divided between various departments. Different departments do their jobs in occurrence with the bank policies. In Habib Bank, each branch is divided into various departments. Each department is managing by head of department & procedures are followed by officials of the branch. The Departments working in HBL are as: 1. 2. 3. 4. 5. 6. 7. Account opening Depatment Remittance Department Clearing Department Accounts Department Cash Department Credit Department Information Tecnology Department

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1.
A.

ACCOUNT OPENING DEPARTMENT.

HOW TO OPEN AN ACCOUNT There are certain formalities which are to be observed for opening of

a current or saving account with a Bank. These formalities in brief are as under i. FORMAL APPLICATION: The customer is to fill "Account Opening Form. It is a formal request by a customer to the bank to allow him to have and operate the current or saving account. ii. OBTAINING INTRODUCTION:-

The bank before opening, and account obtains introduction of the customer from old customer, responsible person etc. iii. SPECIMEN SIGNATURE

When the Banker is satisfied about the integrity of the customer, he agrees to open the account. The Banker obtains the specimen signatures of the customer on the signature book or on card. IV. MINIMUM INITIAL DEPOSIT:In Pakistan the current account can be opened with a minimum of Rs. 500/- and PLS Saving Account with a minimum of Rs 100/- These amounts are also the minimum balances to be maintained by the account holders with the Bank. V. OPERATING THE ACCOUNT.

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When an account is opened in a Bank, the Banker gives to the customer. i. ii. IV. Pay in slip book. Cheque Book and pass book with a view to operate it.

PRECAUTIONS IN PREPARING THE PASS BOOK:-

The Banker should be careful in preparing the pass book However, the customer himself should. i. ii. iii.
iv.

Send the pass book for making entries and also periodically check up them. He should also see that the entries are initialed by the accountant. The customer should verify the entries with own books of account. In order to safe guard the secrecy of the account; the customer should receive the pass book in closed cover.

B.

WITH-DRAWL. Withdrawal is made on cheques supplied by the Bank. A new cheque

book is issued only on receipts of the requisition slip attached to the cheque book issued previously and this presented along with the depositor pass book for entire against cheque book challan. Cheque book is issued on discretion of the branch manager.

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C.

INTEREST. The current rate of interest allowed on deposit in saving Bank account

is ascertained at the Bank. This rate is subject to change. The amount of interest is calculated for each calendar month on the lowest balance at credit of an account between the close of the sixth day of a month and the end of the month and only on every complete sum of ten rupees.

Every account is made up half yearly to 30th June 31st December, and the interest calculated as above is added to the balance of each account as on these dates. D. TRANSFER OF AN ACCOUNT. Account can be transferred to any other branches of N.B.P. free of charge. If a depositor wants to transfer his account, he presents his pass book personally or sends it to Bank and writes an application for the transfer of an account. E. CLOSING OF AN ACCOUNT: A depositor willing to do, his account must present his pass book in order that with drawls and the amount of interest due on the account is entered therein and final balance stuck. This balance is then paid to the depositor and his receipt is taken, the pass book is canceled, unused cheque forms on hand are also surrendered at the same time.

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F.

SECRECY: The secrecy of depositors account is the. Responsibility of every

official engaged in the Bank service. G. MONEY DEPOSITED OR DRAWN BY POST: When money is sent by post for deposit, the pass book and a letter starting the amount of the deposit and the number of the account accompany it. When a depositor wishes to withdraw money by post he must forwards his pass book with a letter starting the number of his account, the amount to be drawn and either the money is to be remitted by money-order or in currency notes registered.

TYPES OF BANK ACCOUNT. i. SAVING ACCOUNT:

Saving Account is that account in which customer puts his surplus money which he saves from his daily expenditure. The account can be operated by depositing a minimum cash of Rs. 5/-. Small percentage of interest is allowed on the balance of this account.

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ii.

CURRENT ACCOUNT: The current account is that one which the customer draws his daily

cheques and is normally operated by the Business-men. It can be operated by minimum amount of Rs. 500/- Any number of cheque amounting undue minimum balance limit can be issued by the account holder for withdrawal or for payment. No interest is allowed on this account. iii JOIN ACCOUNT A joint account occurs when two or more than two customers have one account. The parties to a joint account are considered in law as they are one person.
iv.

PROFIT AND LOSS SHARING ACCOUNT. This can be operated by a person, firm or organization by depositing

Rs. 100/- or above. The holder of this account will get profit of his amount, or he will bear the loss as the case may be. So an individual is equally participant in profit and loss. The holder of account can withdraw up to Rs. 15,000/- per month is eight withdrawals, in case of higher withdrawal, seven day prior notice is necessary. This account is operated under interest free system.

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v.

FIXED DEPOSIT ACCOUNT.

In this account an amount is deposited into the Bank for a fixed period of time. The fixed period may be three months, six months, one year, two years, five years and more. The Bank allows a higher rate of interest for larger period. At the time of operating on account the Bank issues deposit certificates for the period and amount. The account holder can not withdraw his amount before the specified period, but the same Bank will allow loan against that certificate. Bank is liable to give interest on this account on maturity date.

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2.

REMITTANCE DEPARTMENT.

Remittance means transfer of money from one place to another place. It is of two kinds. I. II. Inland remittance. Home remittance.

1.

INLAND REMITTANCE.

An inland remittance means a transfer of money payable at a certain place within the country. Inland remittances can be classified as under:a. b.
a.

Within locality. Out side locality.

WITHIN LOCALITY When a branch situated in D.I.Khan is required to send drafts to any

other branch situated in the same city the process is know as within locality. For example HBL. Main Branch, D.I.Khan sends any draft to HBL. Rakh Mandar branch, D.I.Khan.

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b.

OUTSIDE LOCALITY. Outside locality is an important type of inland remittances, which

means the transfer of money payable outside the city. For example, HBL. Main Branch D.I.Khan sends any draft to a Branch situated at LAHORE. It is commonly done through the following three means:i. ii iii Telegraphic transfer (T.T) Mail Transfer (M.T) Demand Draft (D. D)

i.

TELEGRAPHIC TRANSFER In telegraphic transfer, the Bank takes commission and telegram

charges from the sender. A receipt is issued to the sender for the value received. The Bank itself transfer the funds to the drawee branch though a coded message in telegram, confirmatory of which is also sent through routine date mentioning all details. All bank Branches have been provided with their code books name Bank Keys Code Book where from the coded message is agreed by the drawee branch. T.T. can be sent open, which may be paid in cash in drawee branch, or may be direct y creditable to relevant account.

21

ii

MAIL TRANSFER (M.T.)

The Money can be remitted through this means also. In this case the payable amount at the drawee branch can only be transferred to an account; amount can not be paid in cash. Other procedure is same as T. deposit of money at sending branch. Difference is only of postage and. telegram charges. The M.T. which in its self is an advice also is sent by registered post, while T.T. is sent through telegram.
iii DEMAND DRAFT (D.D)

Demand draft is a written order by a branch of a specified Bank, drawn on another branch of the same Bank to pay a certain sum of money only to or to the order of the Payee. Demand drafts are purchased by the clients and after receipt of money Bank issues and delivers the D.D. to the purchaser, who himself sends it to the payee. In D.D. the Banks do not recover postal charges as it is payable by the purchaser. The Bank, after deliver of D.D. to the purchaser also sends its own advice called IBCO (Inter Branch Credit Order) to the drawee branch mentioning therein all details of issued draft.
5. ACCOUNT SECTION.

Every Business organization deals in money matters. Bank also deals in money and more over since the money belong to the depositors therefore, it is of utmost importance to keep systematic and correct record.

22

Further-more, the Banks are commercial institutions and its main objective is to earn profit, therefore, then record of all incomes and expenditures are kept correct and systematically. In H.B.L. the responsibility for maintaining necessary accounting data and to keep up to date records In a systematic manner has been assigned to the Accounts Department. The Branches of Bank perform their daily routine work and deal in money that belongs to depositors. Here account department hold great importance in banking, because it keeps all the accounting records properly.

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3.

CLEARING DEPARTMENT.
Every Bank performs the paying and receiving functions. Cheques are

collected which are drawn up to Banks for customers. Similarly the cheques drawn on different Banks and deposited by Banks own customers for collection within the city is know as clearing The functions of receiving and paying is mostly done through the clearing house. A clearing house can be defined as "AA place where that representatives of all Bank get together to settle the receipts and payment of cheques drawn on each other" Clearing House provides the facility which can hardly be dispensed with especially, in case of crossed cheques. There are two main types of clearing. i ii Outward clearing Inward clearing.

i. OUTWARD CLEARING: It includes those cheques and other instruments which are sent by the Bank to the Banks for payment on behalf of its own clients. Cheques are sent to clearing house thorough local main branch A delivery message from the local main branch comes to every branch at a fixed time to pick its outward clearing or outward returns as the case maybe.

24

Outward Clearing At Branch

a. b. c. d. e.

Account number of payee/endorsee is written on the back side of the cheques. The instrument and the paying in slips are separated. The instruments are sorted I Bank-wise and branch wise. Schedules are prepared. Jotting of all the schedules are taken in the clearing House statement. Amount of the cheques in written in the "Delivered" and to pay column.

f.

After balancing the outward clearing, the pay in slips are released to C.D. department.

g. h.

After balancing, a transfer debit voucher is prepared. The instrument, schedule. etc. are delivered to the messenger from the main branch.

ii.

INWARD CLEARING. The cheques drawn are called inward clearing drawn on Habib Bank

through its representatives. on the Bank presented by other Banks for payment It includes those cheques and other instruments of Pakistan branches which other Banks present at the clearing house. Inward Clearing At The Drawn Branch a. Numbers of instruments noted in the schedules are verified
25

immediately on receipt. b. The amount's of all the instruments are jotted down and totaled. If should be equal to the amount mentioned in schedule from the local main branch. c. d. e. The amounts are debarred to the relevant accounts if otherwise in order. The IBCO is prepared crediting the amount of the main branch. If there is any return, that is deducted from the total and IBCO prepared for the remaining amount. TYPES OF CHEQUES COLLECTED BY CLEARING SECTION.
1. TRANSFER CHEQUES.

These are the cheques which are collected and paid by same branch of HBL For example Mr. Ali is a customer of HBL of CITY branch and draws a cheque in favor of Mr. Hussain who is also the customer of the same branch.
2. TRANSFER DELIVERY CHEQUES.

The cheques which are collected and paid by two different branches of a Bank situated in the same city. For example a person draws a cheque on N.B.P. main branch, D.I.Khan in favor of another person who maintains an account with N.B.P. Rakh Mandra branch, D.I.Khan.
3. CLEARING CHEQUES.

When the payee/endorse and the drawer of cheque maintains account with different Banks, the collection Bank in any one of the following methods:26

a. b. c.

It can collect cash by sending its representative with the cheques to each of the paying Banks. It is not so much appropriate. The Bank maintains an account with the paying Bank. The cheques can be exchanged by representative of the various Banks who meet at a fixed time and at a fixed place. This is the most efficient method of collection and paying cheques.

FUNCTIONS OF CLEARING SECTION IN A BRANCH.

a.

To accept transfer, transfer delivery and clearing cheques from the customer of the branch and to arrange for their collection.

b.

To arrange payment of cheques drawn on the branch and gives for collection to any other branch of H.B.L. or any other member or such member of local clearing house.

c.

To collect amounts of cheques drawn on members of the local clearing house sent for collection by N.B.P. branches not represented at the local clearing house.

PROCEDURE FOR CLEARANCE OF CHEQUE. The customers are provided with the copes of pay In-slip, whenever the customer wants to deposit any cheque, he fills in the pay in slip himself and hands it over the counter along with the instrument.

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4.

ACCOUNTS DEPARTMENT.

The account department maintains all the accounting records properly there are certain accounting terms which are defined into the following 1. ACCOUNT A summary of all debit and credit transaction pertaining to a similar nature or to an individual or body of persons is called an account. 2. VOUCHERS Written evidence recorded on a price of paper in respect of a money transaction is called voucher. 3. GENERAL LEDGER. Main ledger is a book, where various accounts of different type are kept. Generally this book is in bended form containing several sheets for several accounts. 4. SUBSIDIARY LEDGER. Where a main head has got different sub-head of it: subsidiary leader are maintained. These subsidiary ledgers are maintained from the main ledger.

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BOOKS AND STATIONERY. The account department uses the following books and stationery a. b. c. d. e. f. g. h. i. Cash book cum-general ledger. Abstract book. Income and expenditure ledger. Register of vouchers Transfer book. Receiving cashier book. Paying cashier book. Supplementary sheets. Different vouchers.

FUNCTIONS OF THE ACCOUNT SECTION. The main functions of the account section of a branch are as follows: 1. 2. Balancing and maintenance of books. Preparation of statement.

During the course of daily business of the branch, a number of cheques are presented by customer for cash payment, though transfer,
29

delivery and clearing cheques at the counter. Also a number of new accounts are opened and cash is deposited by the customers. A number of new vouchers are passed by the branch by debiting, one account and crediting another account. So in order to ensure that during the day all the transactions have properly been recorded and they are complete in all respects and are recorded in proper books by the branch this recording is done on daily basis and maintained by account section.

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5. Cash Department
Receipt of cash from the customer. Match title of the account, count the cash, write denominations of cash received, on the back of the voucher/payin-slip. Sign it at the prescribed place in token of having received the cash and affix the "Cash Received" Stamp. Payment of cash to the customer. Cash paid by the only after receipt of a duly passed Cheque / cash payment voucher etc. Ensured that the instrument is properly dated, amount in figures and words is the same and it bears the signatures of the drawer and has been duly passed for payment by the authorized officer. Cash paid stamp is be affixed on the instruments in red ink. Sale & purchase of prize bonds. Receipt of HBL Credit Card bills. Collection of utility bills like Electricity, Gas, Telephone. Collection of fees like Multan Public School,etc.

Petty cash register is maintained. Income vouchers are prepared & released. Physical count of cash is carried out. Place cash in the safe. Custodians are personally applying keys. ATM is replenished with fresh pre-counted cash on daily basis. Cash position book

& memo is prepared. Cash position book, receiving & paying cashier books are countersigned by the manager.

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6. Credit

Department

Credit department plays a vital role in the function of bank. Credit department issue short term and long term loans to its customers. Habib bank its sharing ratio in profit is very high. The main source of income is its mark up on different types of long term and short term loans. Two types of credit are Funded Credit and Non-Funded Credit. Funded Credit is in the form of physical cash. The interest charged on the funded credit is called mark-up. Non-Funded Credit is the loans in the form of guarantee. These are also called the contingent liability. The rate of interest charged on non-funded loans is called commission.

Evaluation of customer. Credit rating evaluation. Limit application procedure and basic fact sheets. Stock report collection. Collection of insurance cover on hypothecated stock and mortgage property. Evaluation of business credibility for granting loan and financing. Mark up calculation. Procedure of observing prudential regulation involved in loan application.

Implement effective budgetary controls, and analysis of their variances. Checking, verifying, examining and scheduling the invoices of work done as per term and condition. Responsible for budget preparation, cash flow, financial statement, local and foreign payments. Preparation of reports for lenders. Repayment of the loan must primarily come from the productive use made of the money borrowed. Experience and personal qualities of the borrower and nature and prospects of the business must be examined.

32

7. Information Technology Department

Information technology department perform the following important functions: Maintenance of hardware, Up gradation of hardware/ software, Network Maintenance and Troubleshooting, Anti-virus Installation and updating the system, Voucher Printing, Day-End Processing, Day-End Reports, Reports of weekly, Monthly and Half Yearly, Liaison between ETD and Branch, ATM Operations, Maintenance, Troubleshooting and Back ups. Handling customers complaints against ATM closure. Statements of accounts and vouchers are printing on daily basis. Customer complaints against ATM clouser, communication breakdowns, cash replenishment are on daily basis.

ATM Balancing, Customer complaints against ATM closure due to any reason, ATM disputed transaction, Customer queries against ATM card usage, Faultiness, Funds Transfer, Cash withdrawal, Internet, Online Circulars, Signature Software. Backing up of data (Signature, Daily Back, Month End Back Up, and System Back UP) is prepared for the month. Statements of accounts and vouchers are printed on daily basis. Network maintenance and troubleshooting are on daily basis. Delivering services to internal customers.

33

Structure and Functions of the Accounts/Finance/Audit Department Finance and Accounting Operations
Habib bank deals in finance and accounting operations. They check the daily voucher and posting. They note all the banks charges and expanses. The main focus on bank financial statement, they prepare the financial statement annually and semi annually of the bank. All accounting and financing activities are checked in this department. Preparation of daily bank positions statement Payment of salaries Preparation of the statements Depreciation calculation Expanses, Income, Liabilities Generation and Allocation of funds Manager Accounts look the following functions Finalize the Accounts on monthly basis.. Preparation of special reports as per instruction by Branch Manager. Supervise all the working of other staff members. Verify the partys payment & all other expenses payments Deputy Manager Accounts responsible for the functions like: Posting in the Accounting System. Supporting to Manager Accounts to finalize the Accounts on monthly basis. Supporting to make the monthly budget of the company.

34

 Preparation of Debtors and Creditors reconciliation reports and aging schedules. Preparation of Special reports for decision making of Management. Accounts Officer maintain the following Prepare fund flow statement on daily basis. Supporting to prepare weekly budget. Posting of Funds Received from parties. Tax Officer s role is to Handle all sales tax and income tax matters. Preparation of Refund case & Processing in department. E-Filing of both (Sales tax & Parties tax payment) E-Filing of both (Sales tax & Parties tax payment)

35

Role of Financial Manager

Financial manager (Branch manager) of a bank administers and manages all of the functions of a branch office. Job duties may include hiring personnel, approving loans and lines of credit, establishing a rapport with the community to attract business, and assisting customers with account problems. Branch mangers also are becoming more oriented toward sales and marketing. As a result, it is important that they have substantial knowledge about all types of products that the bank sells. The duties of financial managers vary with their specific titles, which include accounts manager, credit manager and cash manager. Accounts manager direct the organizations budgets to meet its financial goals. He oversees the investment of funds, manage associated risks, supervise cash management activities, execute capital-raising strategies to support a firms expansion, and deal with mergers and acquisitions. Cash manager monitor and control the flow of cash receipts and disbursements to meet the business and investment needs of the firm. For example, cash flow projections are needed to determine whether loans must be obtained to meet cash requirements or whether surplus cash should be invested in interest-bearing instruments. Credit manager oversee the firms issuance of credit, establishing creditrating criteria, determining credit ceilings, and monitoring the collections of past-due accounts. A manager also performs the important functions which includes a manager makes organizational decisions and handles a variety of problems that arise

36

on a daily basis. A manager establish goals and planning out the directions allow for effective time management and saves cost and resources. A manager is the middle person in between the top management level and the team that reports to him. He has to ensure that communication is smooth and conveyed clearly to avoid misinterpretations and dissatisfaction. A manager has the capacity to evaluate and examine a process or procedure and decide on the best choice to produce an outcome. A manager satisfies customers by giving good quality of service or product and takes care of their needs. Managers who set high standards or goals and achieve them are great leaders by examples. The ability to tolerate stress and remain poise under job pressures and still maintain a high activity and energy level are contagious. Manager is responsible to supervise and take charge of the activities and productivity of their workers. A manager plays an important role in managing the performance of their staff and involved in employee selection, career development, succession planning and working out compensation and rewards. A manager is also responsible for the growth and increase in the organizations' finances and earnings.

37

Use Electonic Data in Decision Making.

Habib Bank uses MYSIS software, which fulfill the entire accounting requirement according to international standard. The network used by the Bank is LAN (Local area network) while other branches are also using WAN (wide area network). In addition to this signature verification software is there, online report browser is there, exchange server software etc. All the transactions occur through this system. Following points explain how the electronic data is used for decision making: All circulars including forex, information, instructions, staff and Zakat are available on bank website which is helpful for any kind of matter related to any query. Online transactions are done and maintained though Uni-Bank system. This financial data is up-dated by every transaction. Tax statements are prepared with help of financial statements of bank for the purpose of collection of taxes under the instructions of State Bank of Pakistan. Financial statements for the last five years are available on bank website. This financial data is helpful for making branch budget, income and expense vouchers. Foreign currency rates are calculated by treasury division with the help of stock exchange s of the world. Foreign currency transactions are done through the internet with the other banks of the world for making the financial transactions effectively.

38

Sources Of Funds.
Businesses can use a wide range of sources of funds to help finance their trading activities. Without funds, it is impossible to carry out any business. Funds are remaining necessary for the business of the banking sector and also the main element for carrying out the operations business concern. The following are the main sources of funds for Habib bank

Year Deposits Borrowings Share capital

2007 404629 29346 6900

2008 432545 34904 6900

2009 459140 56392 6900

2010 531298 58994 6900

Rs. In million 2011 597091 46844 7590

700000 600000 500000 400000 300000 200000 100000 0 2007 2008 2009 2010 2011 Deposits Borrowing share capital

Comments By the end of 2011, deposits had reached Rs. 597091 million from Rs. 531298 million at the end 2010, an increase of 12.3% during the year. Deposits are generally regarded as the lifeblood of the banking industry. In order to improve the deposit base of the bank a Sustainable Long Term

39

Deposits Mobilization Strategy has been devised. For this purpose a team of young and energetic Business Development Officers (BDOs) established last year is functioning very effectively. Borrowing is the second source of funds of Habib bank. Borrowing from other financial institutions meets the financial needs of the bank for the short period of time. Bank borrowing situation is positive and effective which shows bank stands good position in the banking business. Aggregate cost of deposits has increased but borrowing has decreased in the current year.

40

Generation Of Funds
A bank can generate funds by selling part of itself in the form of shares to investors, which is known as share capital. The benefit of this is that investors do not require interest payments. Shareholders are of-course the owners of a bank, they invest money in the hope of capital growth, (that is the business makes profits, grows, makes more profits, so as the business becomes bigger their investment will be worth), and dividend (the shareholders share of the companies profits). Habib bank generates the funds through the following sources:

Year Share capital Subordinated loans

2007 6900 -------

2008 6900 ----------

2009 6900 ----------

2010 6900 3100

Rs. In million 2011 7590 3954

8000 7000 6000 5000 4000 3000 2000 1000 0 2007 2008 2009 2010 2011 Share capital Sub-ordinated loans

41

Comments Habib bank generates the funds through share capital from selling their shares to the shareholder and the general public. This is the best way to generate the funds for meeting their financial needs timely. Share capital amount increases every year which shows that Habib banks overall position is better than other banks. Sub-ordinated loans represent Sub-ordinated Term Finance Certificates issued by the bank to the general public. Sub-ordinated loans are helpful for meeting the financial needs of the bank. In the current year 2011 the share capital increased by 10%. And sub-ordinated loans increased by 27.5%.

42

Allocation of Funds.
Allocation of funds provide a portfolio of a fixed or variable mix of the three main asset classes - stocks, bonds and cash equivalents in a variety of securities. This strategy can help balance risk while seeking to provide competitive returns. Some allocation funds maintain a specific proportion classes over time, while others vary the proportional composition in response to changes in the economy and investment markets. Habib bank allocates their funds in the following ways:

Year Advances Investments Lending to financial institutions

2007 259089 134523 3755

2008 316882 107384 12272

2009 349433 119587 6550

2010 382173 177942 1628

Rs. In million 2011 456356 138146 6193

500000 450000 400000 350000 300000 250000 200000 150000 100000 50000 0 2007 2008 2009 2010 2011

Advances Investments lending

43

Comments Advances are stated net of provisions for non-performing advances. Provision for advances is determined in accordance with the requirements of the Prudential Regulations issued by the State Bank of Pakistan from time to time. The increase in advances, coupled with strengthening effective rate of return, resulted in 19.4% increase in mark-up revenues from advances compared to last year. Advances include corporate sector, SMEs sector, agriculture sector, consumer sector, commodity sector and staff loans. Investments are classified as held for trading, available for sale and held to maturity. The investment portfolio registered a negative growth of 22.3% over last year which stood at Rs. 138146 million as at December 31, 2011 against Rs. 177942 million at December 31, 2010.

44

FINANCIAL ANALYSIS

BALANCE SHEET HORIZONTAL ANALYSIS

Particulars
Assets: Cash & balance with treasury bank balance with other banks Lending to financial institutions Investments Advances Operating fixed assets Deferred tax assets Other assets Total assets Liabilities: Bills payable Borrowings

2009
Rs.(000) 79839836 40366687 5352873

2009-10
%age 2.25 (7.32) 466.78

2010
Rs. (000) 81640246 37413185 30339344 254909116 459750012 16155290 9572203 34920007 924699403 Rs.(000) 9775093 40459860

2010-11 2011
%age 26.65 26.55 37.05 64.22 0.52 18.65 (23.98) 28.32 23.23 %age 42.14 (2.43) Rs. (000) 103399623 47349505 41581029 418604147 457367656 19167654 7275888 44808703 1139554205 Rs.(000) 13894502 39473670

216467532 17.76 454662499 1.12 16766668 9205944 41262754 (3.67) 3.98 15.37

863924793 7.03 Rs.(000) 10041542 52542978 %age (2.65) (23.0)

45

INCOME STATEMENT HORIZONTAL ANALYSIS

Particulars
Markup/interest earned Markup/interest expense Net markup income Provisions against non performing loans Reversal of provisons charge/Reversal for diminution in investment Total provisions Net interest income after provisions Non-markup income: Fee, commission Dividend income Share of profit in associates Gain on sale of securities Income from dealing in foreign currencies Total non markup income 44740487 (71.47) 12762431 15.83 14782861 1913115 66.71 3189333 17.93 3756094 3333000 90.49 316823 71.11 542118 5316479 597018 1913115 2.19 13.26 63.0 5432706 343252 713678 12.02 26.61 51.52 6085970 434604 1081358 9089659 33580875 16.54 17.35 7585664 39409109 8.70 36.95 6925497 49472706 (51396) 346495 39.88 86.24 (30895) 47671 70.41 397.33 (9141) 237083 42670534 8794560 10.13 13.55 46994773 7602440 20.01 11.90 56398203 6697555

2009
76076347 33405813

200910
6.90 2.76

2010
81325028 34330255

201011
21.21 22.87

2011
98580423 42182220

46

Non markup expenses: Administrative expenses Other provisions/write offs Other charges Workers welfare fund Total non markup expense Profit before taxation Taxation Net profit after tax 21381636 7980887 13400749 26.46 25.37 27.11 27040030 10005650 17034380 26.93 19.82 31.10 34321398 11988376 22333022 3540 399166 23358851 49480 30.69 17.22 178700 521702 25131510 56.58) 27.47 19.11 77588 665047 29934169 210190 (15.24) 178148 36.08 242427 22745955 6.63 24252960 21.36 29433961

Ratio Analysis
A ratio can be computed from any pair of numbers. Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and historical trends of these ratios can be used to make inferences about a company's financial condition, its operations and attractiveness as an investment.

47

Earning to Assets:-

Earning assets are the assets which are very important for any company for the bank. Ratio tells that on what percentage earning assets contribute the total assets. While bank also has increased its earning assets ratio shows the more profitability of the bank as it can be shown by the profit and loss account of the different year that shows the net mark up income more for the year as compared to the previous years so bank is going gradually to the more profitability by giving more advances and loans. Earning to assets calculated as: Earning to assets = Earning Assets
Total Assets No. of Year Ratio 2007 1.63 2008 1.62 2009 1.56 2010 1.57 2011 1.57

1.64 1.62 1.6 1.58 1.56 1.54 1.52 2007 2008 2009 2010 2011 Earning assets

Earning assets ratio

in 2007 is 1.63; in 2008 it is 1.62 which is little decrease as compare to previous year. This ratio in 2009 is 1.56 a little decrease from previous year and in 2010 it is 1.57 and it is same in last year 2011 which is 1.57.

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Equity Capital To Total Assets:-

Equity capital to assets is a common measure used to analyze capital adequacy of a bank, bank has increased its capital adequacy ratio in the year. Banks total assets has increased and equity also increased. It is calculated =
Total Equity Total Assets 2008 0.07 2009 0.08 2010 0.09 2011 0.09

No of Year Ratio
0.1 0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2007

2007 0.06

Equity capital to total assets

2008

2009

2010

2011

Equity capital to total assets in 2007 is 0.06; in 2008 it is 0.07 which is increases as compare to previous year. In 2009 is 0.08 again increases from previous year and in 2010 it is 0.09 and in last year 2011 which is 0.09. Equity capital to total assets ratio is increases year to year. Net Profit Margin:-

A ratio of profitability calculated as interest income divided by revenues, or net profits divided by interest income. It measures how much out of every rupee of interest income a bank actually keeps in earnings. Profit margin is very useful when comparing bank in similar industries. A higher profit
49

margin indicates a more profitable bank that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage. N.P margin is calculated as: =
N.P after tax * 100 Sales

No. of Year Ratio

2007 31.6

2008 29.8

2009 29.0

2010 19.9

2011 24.6

35 30 25 20 15 10 5 0 2007 2008 2009 2010 2011 Net profit margin

Net profit margin in 2007 is 31.6; in 2008 it is 29.8 which is decrease as compare to previous year. Net profit margin in 2009 is 29.0 is almost equal from previous year and in 2010 it is 19.9 and net profit margin is in last year 2011 which is 24.6.

Debt to Assets Ratio:-

The debt to assets ratio indicates the percentage of assets financed by creditors, and it helps to determine how well creditors are protected in case of insolvency. If creditors are not well protected, the company is not in a position to issue additional long term debt. It is calculated as:

50

Total liabilities Total Assets

*100

No.of year Ratio

2007 93.4

2008 92.3

2009 91.0

2010 90.8

2011 90.0

94 93 92 91 90 89 88 2007 2008 2009 2010 2011 debt to asset

Debt to equity Ratio:The debt to equity ratio is another computation that determines the entitys long term debt paying ability. This computation compares the total debt with the total shareholders equity. The debt to equity ratio also helps determine how well creditors are protected in case of insolvency. From the perspective of long term debt paying ability, the lower this ratio is, the better the companys debt position. It is calculated as: =
Total liabilities *100 Shareholder equity

No.of year Ratio

2007 1423.0

2008 1206.3

2009 1011.5

2010 994.2

2011 908.1

51

1600 1400 1200 1000 800 600 400 200 0 2007 2008 2009 2010 2011 Debt to equity

Debt to equity ratio in 2007 is 1423.0, and in 2008 it decrease as 1206.3. in 2009 it is 1011.5. also in 2010 it decrease as 944.2. this shows that debt to equity ratio constantly decrease. In the last year 2011 it is 908.1.

Return on equity:-

Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. Return on equity also known as "return on net worth" (RONW). ROE is expressed as a percentage and calculated as: = Net Income_ Shareholders Equity

25 No. of Year 20 Ratio 15 Return on equity 10 5 0 2007 2008 2009 2010 2011 52 2004 17.9 2005 23.8 2006 23.7 2007 15.9 2008 20.7

Return on equity ratio shows that bank earn good profit trough shareholders funds. In 2008 return is maximum which is 23.8 and minimum in 2007 which is 17.9. Overall return on shareholders funds is positive. Return on Assets:-

Return on average assets gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment. The formula for return on assets is: = Net Income after tax *100 Total Assets

No.of year Ratio

2007 1.18

2008 1.82

2009 2.13

2010 1.45

2011 2.06

53

2.5 2 1.5 1 0.5 0 2007 2008 2009 2010 2011 Return on assets

Return on average assets ratio shows that management utilizes their assets in beneficial projects and made sound investment. In 2009 the return is higher and lower in 2007. and last year 2011 the return is 2.06.

Net worth to Total assets ratio:-

Net worth ratio determines the entitys long term paying ability. This ratio also shows that how much creditors protected because in it the assets ratio also use. It is calculated as: = Net worth *100 Total Assets

No.of year Ratio

2007 6.56

2008 7.65

2009 8.99

2010 9.13

2011 9.91

54

12 10 8 6 4 2 0 2007 2008 2009 2010 2011 Net worth to total assets

Net worth to total asset ratio is higher in 2011 as 9.91 and lowest in 2007. the chart shows that is gradually increases from year to year.

Loan to deposit ratio:-

While there is a concept that banks loans are its assets while its deposits are liabilities. But if a bank has low deposits then obviously it will give low loans because bank gives its loans by the deposits and earn on the loans then pay mark up on the deposits to the customers. It is calculated as: = Loan Deposits

0.03 0.025 0.02 0.015 0.01 0.005 0 2007 2008 2009 2010 2011 Loan to deposit

No.of year Ratio

2007 0.009

55

Loan to deposits ratio in 2007 is 0.009; in 2008 it is 0.028 which is little increase as compare to previous year. Loan to deposits ratio in 2009 is 0.014 a little decrease from previous year and in 2010 it is 0.003 and loan to deposits ratio is highest in last year 2011 which is 0.01. Average Yeild on Assets:-

Annual or other periodic rate of return on investments because banks act as custodians of deposits for many years until money must be paid out the depositors, They invest it to achieve a yield adequate to meet these obligations. Yield is also important to the depositors that include a specific investment element. It is calculated as: = Total interest income Total Assets

No.of year Ratio

2007 0.02

2008 0.01

2009 0.06

2010 0.01

2011 0.02

56

0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2007 2008 2009 2010 2011 average yeild on assets

Average yield on assets in 2007 is 0.02; in 2008 it is 0.01 which is decrease as compare to previous year. Average yield on assets in 2009 is 0.06 a little increase from previous year and in 2010 it is 0.01 and average yield on assets is in last year 2011 is 0.02. Average yield on assets in 2009 is highest and in 2008 and 2010 it is lowest.

Interest Expense to Interest income:-

Interest income and interest expense are calculated from the banks income statement. This ratio shows the income and expenses of the bank. It is calculated as: = Interest expense Interest income

No.of year Ratio

2007 1.42

2008 1.83

2009 2.04

2010 1.80

2011 1.33

57

2.5 2 1.5 1 0.5 0 2007 2008 2009 2010 2011 Interest expense to interest income

Interest expense to interest income ratio in 2007 is 1.42; in 2008 it is 1.83 which is little increase as compare to previous year. This ratio in 2009 is 2.04 a little increase from previous year and in 2010 it is 1.80 and ratio is lowest in last year 2011 which is 1.33. Advances to deposits ratio:Advances to deposits ratio demonstrate the degree to which bank has already used up its available resources to accommodate the credit needs of its customers. It is calculated as: = Advances *100 Total deposits

No.of year Ratio

2007 64.0

2008 73.2

2009 76.1

2010 71.9

2011 76.9

58

80 75 70 65 60 55 2007 2008 2009 2010 2011 Advances to deposits ratio is a comparison of funds generation and its funds mobilization, indicates the total loans sanctioned by the bank in relation to total amount of money deposited with the bank. At present, the bank has got a relatively small amount of advances as compared with its deposits raised. One reason for fewer advances is the selective approach on the part of the management while deciding upon credit proposals. Advances to deposits

Cash Ratio:Sometimes an analyst needs to view the liquidity of a firm from an extremely conservative poit of view. For example the company may have pledged its receivables and its inventory, or the analyst suspects severe liquidity problems with inventory and receivables. The best indicator of the companys short run liquidity may be cash ratio. Cash ratio indicates that how much cash the company has to pay its current liabilities. Cash is the most liquid asset of the bank. Cash ratio is calculated as:

Cash Current Liabilities

No.of year Ratio

2007 4.20

2008 5.72

2009 4.87

2010 3.59

2011 5.68

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7 6 5 4 3 2 1 0 2007 2008 2009 2010 2011 Cash ratio

Cash ratio is highest in 2008 and lowest in 2009. and in the last year 2011 the ratio is 5.68. Operating Efficiency ratio:This ratio is computed by comparing operating expenses to operating revenues. It measures cost and should kept low, but external conditions, such as the level of business activity, may affect this ratio. Operating revenues vary from year to year because of differences in rates, variations in the price level, the type of services performed and the effectiveness of operating and maintaining the properties. This ratio is calculated as: = Total operating expenses Total operating revenues

No.of year

2007

2008

2009

2010

2011

60

Ratio

1.42

1.83

2.04

1.80

1.33

2.5 2 1.5 1 0.5 0 2007 2008 2009 2010 2011 Operating efficiency ratio

Operating ratio in 2009 is highest as 2.04 and lowest in last year 2011 which is 1.33. in 2008 the ratio is 1.83, a little decrease from 2004. in 2007 the ratio is 1.42. in 2010 the ratio is 1.80.

Return on Earning assets:-

Return on earning assets measures the firms ability to utilize its earning assets to create profits by comparing profits with the earning assets that generate the profits. Compute the return on earning assets as follows: =
Profit after tax Earning assets

No.of year

2007

2008

2009

2010

2011

61

Ratio

0.007

0.011

0.013

0.009

0.013

0.014 0.012 0.01 0.008 0.006 0.004 0.002 0 2007 2008 2009 2010 2011 return on earning assets

Return on earning highest in 2011 and in 2009 which is 0.013 and lowest in 2007 which is 0.007.

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Common Size Analysis (Vertical and Horizontal)

The term "trend analysis" refers to the concept of collecting information and attempting to spot a pattern, or trend, in the information. In some fields of study, the term "trend analysis" has more formally-defined meanings. Although trend analysis is often used to predict future events, it could be used to estimate uncertain events in the past. Financial statement information is used by both external and internal users, including investors, creditors, managers, and executives. These users must analyze the information in order to make business decisions, so understanding financial statements is of great importance. Several methods of performing financial statement analysis exist. I will discuss two of these methods: horizontal analysis and vertical analysis.

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ORGANIZATIONAL ANALYSIS Key Figures For the Year 2011 Operational Results Total Income Operating Expenses Profit before Income Tax Profit after Taxation Balance Sheet Shareholders Equity Total Assets Advances Investments Deposits Business Transacted Imports Exports Ratios Loan to deposit ratio Return on equity ratio Return on assets ratio Debt to equity ratio Advances/Deposits Ratio Cash Dividends Share Information Earnings per Share Other Information No. of Employees % 74290 757928 456356 138146 597091
Rs. In Millions

Habib Bank
In million

Bank Al-Falah
In thousand

53158 21936 22034 15614

36292 10623 1794 1301 17044 348990 192671 75973 300732

Rs. In Thousand

298933 172518 % 0.01 20.7 2.06 9.08 76.4 40.0

Rs.

190289 93406 0.01 9.17 0.38 7.63 64.07 15.0

Rs.

20.47
Numbers

1.63
Numbers

14123

7,584

64

Comments In banking industry, there are various banks which perform their functions under the State Bank of Pakistan. Habib bank faces many competitors such as UBL, ABL, Meezan Bank, Askari bank, Bank Alfalah, Standard Chartered Bank etc. organizational analysis is prepared with the comparison of Habib Bank and bank Al-Falah. Operational results shows that total income, operational expenses, profit before tax and after tax all these items of both banks are good but the financial position of Habib bank is better than Bank Al-Falah. Balance sheet items which include shareholders equity, assets, advances, investment and deposits of Habib bank and Bank Al-Falah.is comparatively good go side by side. Imports and exports items of Habib bank is better than bank Alfalah because of Habib banks foreign country branches play important role in this regard. Ratio analysis shows that Habib banks loan to deposit ratio is equal with bank alfalah. but the ROE ratio of Habib bank is greater. Advances/deposits and debt to equity ratio of Habib bank is much better than Bank Al-Falah.

65

Future Prospects of the Organization It is expected that there would be only a modest slowdown in the pace of growth of Pakistans GDP in fiscal 2007.11. The main impact of such slowdown is expected to be felt in the area of foreign trade, both imports and exports, while the demand for private credit could slow further. There is a degree of uncertainty associated with the turbulence in international financial markets but its direct impact on Pakistans domestic economy is expected to be minimal. Overall prospects for the banking sector suggest a continuation of the trends of the last three years. Future prospects of the bank are the following: Habin Bank will be the leading public sector bank in Pakistan with an international presence delivering quality service through innovative technology and effective human resource management. Habib Bank has passion for its customer, service and ambitious strategic intentions not only in Pakistan but also in the whole region. Habib Bank expects its strong customer focus to drive the banks future business strategy. Increased investment is targeted in developing resources, infrastructure and internal system support the aggressive consumer initiative and explorations of new avenue generation. Furthermore Habib bank has plans to introduce a full suit of innovative consumer finance products designed to capture a significant share of the local consumer financing market and tap into the current growth in demand of such financing.

66

Short- falls / Weaknesses of Organization According to my analysis, Bank faces the following weaknesses: Bank financial policies are not at the top, due to this investors trust has reasonably declined on banks performance and hence the share price of the bank has remarkably decreased. Banks loaning to corporate sector is at stake because of current textile industry sector crisis. The major focus of banks credit policy is towards textile sector; therefore, there is a threat of increase in non-performing loans, extended to textile sector. Bank is offering low deposits rates, due to this deposit turn out of bank is low. Due to shortage of deposits and increasing number of advances, the bank is currently facing liquidity problem. The bank is currently at risk due to shortage of short term current assets and increasing number of short term liabilities. Bank weak credit administration resulting into increasing number of non-performing loans. The major portion of banks earnings is disposed of in provisioning of these non-performing loans. Bank major weakness is the distribution of powers & authority among different levels of management. Bank takes tremendous time to approve a loan proposal and other customers requests. Bank recovery process is less active and hence not as vigilant loan. Bank is not introducing new products and saving schemes. Due to this, bank deposits are less as compared to other banks. Bank has still some of the traditional ways of operations in this advanced technological environment. Bank has computerized accounting system but, still the bankers use to make their entries in the accounting register.

67

Conclusions I compare and analysis the financial statements of Habib Bank Limited and Bank Al Falah Limited. Liquidity position of both companies is not up to standard, both are below industry average, but the liquidity position of Habib Bank is better from Bank ALFalah Limited. Working capital of Habib Bank is better than Bank AL- Falah, but both companies must improve their liquidity position. Leverage ratios indicate the high risk associated with both the companies. Generally leverage ratios, measures the percentage of funds provided by the creditors. The proportion of a firms total assets is being financed with high percentage of borrowed funds. Profitability ratios of Habib Bank Limited are better than Bank AL Falah Limited. Net profit of Bank Al falah Limited is low due to heavy financial charges. Habib Bank has a good market perception due to continuous declaration of dividends but on the other hand Bank AlFalah limited has not announced in dividend in the year 2006 and 2007.
Book value per share of Habib Bank Limited is much higher than

the Al Falah Bank. It is the Indication of the net worth of the corporation. Somewhat similar to the earnings per share, but it relates the stockholder's equity to the number of shares outstanding, giving the shares a raw value. So the net worth of Habib Bank is better than Al Falah Bank. Earning per Share and Operating cash flow of Habib Bank Limited is also better than Bank AL Falah Limited.

68

Recommendations According to my analysis, bank should adopt the following points to overcome the weaknesses: Bank should immediately reduced it further loaning and encourage the more depositors to invest its funds in bank in order to overcome the liquidity problem. Bank should search new sectors for loaning in order to minimize the risk of default and also increase the strength of secured loaning. Bank should impose proper loaning review and risk management department in order to improve its loaning strength and ensure the secured loans. Bank should delegate more authorities to local centers in order ensure the speedy process of loan approval and disbursement. Bank should increase its long term investment and must reduce its short term investments in order to its capital strength. Bank should speed up recovery process of nonperforming loans and other loans as well as in order to improve its credit rating. Bank should put stress on its product development and marketing department in order to introduce the new and unique products for maintaining its competitive edge in the market. Bank should provide the facility of foreign currency accounts to its customers at all branches. Current unibank system used by the bank is very slow in processing, so bank should try to adopt some other but more effective form of technology in order to provide comfort to the customers as well as the staff. Bank should be adopting flexible policies, especially in the areas of the recruitment, promotions, evaluation of the employees.

69

References

Employs handbook of Habib Bank prepared by Human Resource Division of Habib Bank Annual reports of the Habib Bank for the year 2004, 2005, 2006, 2007, 2008 Previous reports on Habib Bank Existing documents of Habib Bank Annual report of the State Bank of Pakistan Lawrence J. Gitman Principles of Managerial Finance 9th Edition, Chapter # 3 Financial Statements, Taxes, Depreciation and Cash Flow The Professionals Academy of Commerce (PAC), Introduction to Financial Accounting Richards, Verlyn D, and Eugene J. Laughlin. Financial management, A Cash Conversion Cycle Approach to Liquidity Analysis James C. Van Horne, John M. Wachowicz, Jr. Financial management 10th Edition, Chapter # 6 Financial Statement Analysis Web Links: www.habibbank.com.pk www.bankalfalah.com.pk www.sbp.com.pk

70

Annexes

Organizational Structure

71

Organizational Structure

Group Executive (G.E)

General Manager (G.M) Band (I & II) (SEVP & EVP)

Deputy General Manager (D.G.M) Band (I & II) (VP & SVP)

S.R Manager Band (I & II)

(AVP)

Manager Band (I & II)

(OGI)

Astt. Manager Band (I & II)

(OG3 & OG2)

Officer Band (I & II)

(OG3 & OG2)

72

Branch Structure
Branch Manager

Credit manager

Operation manager

Credit Department

Operations

Accounts Section Account Opening Section Bills & Remittance Section Clearing Section Online Section Cash Section Information Technology Section

FINANCE DEPT. STRUCTURE

73

CHIEF EXECUTIVE OFFICER (CEO) CHIEF FINANCIAL OFFICER (CFO)

TREASURE

FINANCE DIRECTOR

INVESTMENT G.E

BUDGETIG G.E

CAPITAL STURCTURE G.E

ACCOUNTANT EXECUTIVE

AUDITOR EXECUTIVE

74